Public Sector–Complex Areas to Understand for Maximum Opportunity

The Public Sector is a complex market with a large variety of companies focusing on supplying goods and services to this customer base. In addition, there are a vast number of customers within the Public Sector, each with their own varying requirements for doing business. The defense industry is one of the biggest and most regulated areas in the U.S. Government. Requirements, terms, and regulations exist that you, as a supplier, need to be aware of when dealing in this market. Terms and acronyms such as ITAR and FAR can be somewhat overbearing and challenging. The purpose of this article is to help you understand the very basic definitions of some of these key terms and requirements. Each of these topics will be covered in greater detail independently in subsequent articles.

What are the main areas to be concerned with and what exactly do they mean in your company? The following are the two main terms you might hear while dealing in the Public Sector/U.S. Defense industry:

ITAR – The ITAR is the International Traffic in Arms Regulations, which regulates government contracting firms that supply goods and services to the U.S. Defense industry. These are State Department controls, which impose a wide range of requirements on companies doing business in the defense industry. Requirements include company registration requirements, restrictions on transfer of software and technical data, restrictions on doing business with foreign countries/parties, export licenses, and detailed record keeping. The U.S. Government takes this very seriously and violations related to ITAR can result in steep penalties/fines, criminal liability for both employees and companies, and in some cases, imprisonment. It is important to note that companies are expected to understand the ITAR requirements when they register and that their employees are expected to be ITAR educated and trained related to these requirements. In addition, companies that are in this market tend to push down ITAR requirements on their supply chain. So, it is important to understand who your customers are and any requirements that might impact you as a supplier.

FAR – The FAR is the Federal Acquisition Regulations. The Federal Acquisition Regulations System was established for the codification and publication of uniform policies and procedures for acquisition by all executive agencies. The Federal Acquisition Regulations System consists of the Federal Acquisition Regulation (FAR), which is the primary document and agency acquisition regulations that are required to be implemented. The vision of the FAR is to deliver on a timely basis the best value product or service to the customer, while maintaining the public’s trust and fulfilling public policy objectives. In essence, the FAR enables the U.S. government to procure goods and services in a fair and consistent manner. It defines the contracting vehicles used by the government and the rules enforced. Currently, all federal government executive agencies are required to comply with the FAR, except the Aviation Administration and the U.S. Mint.

The FAR consists of well over 2,000 pages or regulations and requirements. As such, when the government issues a solicitation for products or services, it will call out specifically which areas/sections of the FAR are required. To be awarded the contract, a company must show that they currently comply with all provisions, will comply within a certain time, or qualify for an exception to the provision. As you can imagine, it is important for companies to understand the FAR and the required effort needed to be successful in this market.

This really scratches the surface of being a supplier to the Public Sector, specifically the defense industry. The key point is that dealing in this space takes diligence to understand these requirements before you get too fully vested in this area. The Public Sector market can be a great place to focus your business for maximum opportunity so long as you’ve done your homework.

Graham Brice is a professional within our Finance and Advisory practices. He specializes in providing finance and operations leadership to companies dealing in the Technology and Public Sector markets. In addition, he has recently assisted early stage companies and professional services clients with financial and operational support. He can be contacted at gbrice@fahrenheitadvisors.com or 919-749-3909.